We use cookies to customise content for your subscription and for analytics.If you continue to browse Lexology, we will assume that you are happy to receive all our cookies. For further information please read our Cookie Policy.

Default retirement laws – a ray of light for employers?

The EU Equal Treatment Framework Directive (the Directive)[1] outlaws direct or indirect discrimination. However, it stipulates that member states may provide that differences of treatment do not constitute discrimination if "they are objectively justified by a legitimate aim, including legitimate employment policy, labour market and vocational training objectives, and if the means of achieving that aim are appropriate and necessary".

In Fuchs v Land Hessen,[2] the European Court of Justice (ECJ) recently held that operating a fixed retirement age may be justified if it helps to prevent possible disputes concerning employees' fitness to work beyond a certain age.

Default Retirement Age - a reminder

The Default Retirement Age was removed in the UK with effect from 6 April 2011.

Employers can no longer serve employees notice relying on the statutory retirement procedures under the Employment Rights Act 1996.

Employers are able to operate a fixed retirement age where it can be objectively justified and shown to be a proportionate response to a legitimate social aim.

Facts of the case

Land Hessen is a state in Germany and its laws provide that civil servants shall retire at the age of 65. It is possible for retirement to be postponed on the request of the employees for periods of no more than one year, subject to an overall age limit of 68. However, postponement will only be allowed 'if it is in the interests of the service.'

This retirement age did not apply to all civil servants, such as teachers and lecturers. Elected officials retire at 71 if their term of office had not yet expired. At federal level, the retirement age of civil servants had slowly increased, since 2009, to 67 years of age. However, this was not compulsory at state level and had not been adopted in the Land Hessen.

The case involved two state prosecutors named Mr Fuchs and Mr Kohler. They both worked for the Land Hessen until 2009 when they reached the age of 65. Both were refused postponed retirement on the grounds that it was not in the interests of the service. As a result, they applied to the court and questions were referred to the ECJ regarding the compatibility of the German laws with the Directive.

Decision

The ECJ held that the compulsory retirement age of 65 would satisfy the requirements of the Directive, provided that certain conditions were met.

Were the aims legitimate?

The court concluded that the aim of establishing an age structure that balances young and older employees can constitute a legitimate aim of employment. It was also a legitimate aim to encourage the recruitment and promotion of young people, to improve personnel management and thereby to prevent possible disputes concerning employees' fitness to work beyond a certain age. The age balance ensures that the experience of the older staff is passed on to the younger staff who in turn share their recently acquired knowledge, thus helping to provide a high-quality service.

As the retirement of a prosecutor did not necessarily result in the hiring of a replacement, it was argued that the aim was to save costs. It was held that EU law does not prevent member states taking into account budgetary considerations at the same time as political, social or demographic considerations. However, regardless of the importance of the budgetary considerations, they cannot constitute a legitimate aim on their own.

What evidence is required to show aims were 'appropriate and necessary'?

The Directive imposes a high standard of proof on the member states to show that their aims are justifiable. The measure 'must not appear unreasonable in the light of the aim pursued' and must be supported by evidence, which may include statistical evidence.

In this case the aim was considered appropriate and necessary as compulsory retirement at age 65 did achieve the aim of encouraging recruitment and it was not unduly prejudicing the employees concerned as they were entitled to a pension that was considered reasonable. The Pension available to most prosecutors was the equivalent to 75% of their salary.

Did the measure lack sufficient 'coherence'?

For a law to be considered 'appropriate' it must achieve its aim in a 'consistent and systematic manner'. It is noted that 'exceptions to the provision of a law can undermine the consistency of that law', thus leading to a result contrary to the objective pursued.

The exception which enables prosecutors to work until the age of 68 is unlikely to undermine the aim pursued. The Land Hessen argued that it was an exception which intended to cover prosecutors who reached the retirement age before all their criminal case proceedings had been concluded, thus avoiding any complications with replacing the prosecutor. It was argued that this positively mitigated the rigidity of the law.

It was argued that the reduction in pension rights for those seeking voluntary retirement between the age of 60 and 63 was not coherent with the law. However it was deemed to aid the aim pursued by discouraging early retirement and thus ensuring the age balance.

The fact that the federal government retirement ages were increasing to 67 did not undermine the legitimate aim of the law. There must be a transition from one law to another, which will not be immediate and may take time.

Implications

Some commentators have argued that this ruling will have little impact on employers who are seeking to justify the compulsory retirement of employees. Others believe it to be a wasted opportunity to bring some clarity to this area of the law.

The governments of EU Member States are afforded a degree of freedom when implementing their own discriminatory laws and whilst it may provide useful guidance on the ECJ's approach to objective justification, it cannot be looked at in isolation. UK employers face far more stringent tests, especially in the UK courts and tribunals. Despite this, however, the legitimate aims discussed above could justify compulsory retirement provided they are 'appropriate and necessary' - demonstrating this is where the problem lies!

To view all formatting for this article (eg, tables, footnotes), please access the original here.